Karachi: Engro Fertilizers Ltd. (EFERT) conducted an analyst briefing discussing its financial results for the first half of the calendar year 2025 and provided insights into its future outlook. The company reported earnings of PkR8.5 billion, a decrease of 10% compared to PkR9.4 billion in the same period last year, attributed primarily to reduced sales volumes of urea and DAP.
Gross margins showed improvement, rising to 32.9% from 22.3% in the same period last year. This was due to the absence of EnVen turnaround and imported urea costs. However, nutrient demand remained under pressure, influenced by weak farm economics, high input costs, lack of support prices, and adverse weather conditions, leading to a decline in the urea and DAP markets by 23% and 19% year-on-year respectively.
Urea inventory levels increased to 1,309k tons at the end of June 2025, from 829k tons at the end of March 2025. EFERT's urea sales saw a 19% decline year-on-year to 691k tons. Despite this, the company's market share improved slightly to 29% compared to 28% in the first half of the calendar year 2024. Urea inventory share eased to 43%, with inventory standing at 563k tons.
Regarding urea exports, the management mentioned that authorities are monitoring the situation, and exports will be considered when appropriate. DAP sales decreased by 35% year-on-year to 81k tons, with market share dropping to 18% from 23% in the same period last year. The company remained cautious about the DAP business due to recent increases in international DAP prices.
The management stated that discount offerings on urea would depend on market demand dynamics. The price difference between imported and local urea stands at PkR3,600 per bag, with international landed prices at PkR8,280 per bag compared to a local price of PkR4,649 per bag. Urea sales are expected to remain lower due to challenging farmer economics, and industry urea inventory is anticipated to remain above 1.0 million tons by the end of calendar year 2026.
The company does not foresee any increase in gas prices and expects margins to remain stable. Regarding the Pressure Enhancement Facility (PEF), the first phase's scope-1 is completed, and scope-2 is expected to be completed by the end of August 2025. Procurements for Phase 2 are in progress. EFERT, along with FFC and FATIMA, is jointly undertaking the PEF project to enhance gas pressure from the Mari field, at an estimated cost of US$300 million.
AKD Securities Limited maintains a 'BUY' stance on EFERT with a target price of PkR252 per share by June 2026, supported by expected recovery in offtakes and continuation of higher payouts.